Loan Payments You wish to buy a $20,000 car.The dealer offers you a 5-year loan with an 8 percent APR.What are the monthly payments?

Question

Quizplus · Accepted Answer

The monthly payment for a loan can be calculated using the formula for an amortizing loan: M = P[r(1+r)^n]/[(1+r)^n – 1], where P is the principal ($20,000), r is the monthly interest rate (8% annual rate / 12 months = 0.0066667), and n is the total number of payments (5 years * 12 months = 60). Plugging these values into the formula gives a monthly payment of approximately $405.53.

Loan Payments You Wish to Buy a $20,000 Car